Inflation Fears Spreading

Though Hawaiians are used to high prices, even they're noticing the increases.

In February I was concerned enough about inflation to shift some of the portfolio into traditional hedges like real estate and precious metals.

By May the alarm bells were ringing loudly as the Administration's trillion-dollar deficit spending plans took shape, despite signs of recovery, while at the same time the Federal Reserve committed to keeping interest rates low. (The Fed will buy up government debt and release cash into the economy; this combination of actions is what people mean when they say that the government can spend away because it can "print money.")

Now awareness of inflation is hitting Main Street. Consumers see it everywhere in car, food, gas, and housing prices.

U.S. inflation continued to accelerate in June at the fastest pace in 13 years as the recovery from the pandemic gained steam and consumer demand drove up prices for autos, airline fares and other items.

The Labor Department said last month’s consumer-price index increased 5.4% from a year ago, the highest 12-month rate since August 2008. The so-called core price index, which excludes the often volatile categories of food and energy, rose 4.5% from a year before.

The Fed still holds that the spike is temporary, and to be sure, there are influential voices that hold to the rosy view. As for me, I'm pessimistic but I hope I'm wrong.

Regardless, millions see their pocketbooks being hurt now, and inflation is going to be a hot topic for the 2022 elections.